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Identifying Causal Relationships Between Nonstationary Stochastic Processes: An Examination Of Alternative Approaches In Small Samples

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  • Zapata, Hector O.
  • Hudson, Michael A.
  • Garcia, Philip

Abstract

A Monte Carlo investigation is used to examine the performance of two commonly used tests for Granger causality for univariate and bivariate nonstationary ARMA (p,q) processes. Tests are applied to raw data, first differences of the raw data, and detrended versions of the series. The results indicate that for independent series the tests are robust regardless of sample size. With bivariate series and nonstationarity, the tests results are sensitive to the ARMA specification, whether the data are filtered and the type of filter used, and the sample size.

Suggested Citation

  • Zapata, Hector O. & Hudson, Michael A. & Garcia, Philip, 1988. "Identifying Causal Relationships Between Nonstationary Stochastic Processes: An Examination Of Alternative Approaches In Small Samples," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 13(2), pages 1-14, December.
    • Handle: RePEc:ags:wjagec:32108
    DOI: 10.22004/ag.econ.32108
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    References listed on IDEAS

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    1. Bailey, DeeVon & Brorsen, B. Wade, 1985. "Dynamics Of Regional Fed Cattle Prices," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 10(1), pages 1-8, July.
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    5. Geweke, John & Meese, Richard & Dent, Warren, 1983. "Comparing alternative tests of causality in temporal systems : Analytic results and experimental evidence," Journal of Econometrics, Elsevier, vol. 21(2), pages 161-194, February.
    6. Gamber, Edward N. & Hudson, Michael A., 1984. "Causality Testing With Messy Data: Some Preliminary Experimental Evidence," 1984 Annual Meeting, August 5-8, Ithaca, New York 278982, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    Cited by:

    1. Emerick, Paula A. & Willett, Lois Schertz & Novakovic, Andrew M., 1993. "Incorporating Price Regulation in Causality Tests for Dairy Markets," Staff Papers 121338, Cornell University, Department of Applied Economics and Management.
    2. Zapata, Hector O. & Gil, Jose M., 1999. "Cointegration and causality in international agricultural economics research," Agricultural Economics, Blackwell, vol. 20(1), pages 1-9, January.
    3. Ederer, Stefan & Heumesser, Christine & Staritz, Cornelia, 2013. "The role of fundamentals and financialisation in recent commodity price developments: An empirical analysis for wheat, coffee, cotton, and oil," Working Papers 42, Austrian Foundation for Development Research (ÖFSE).
    4. Basitan, Chris T. & Carver, Robert D. & Menkhaus, Dale J., 1992. "The Market Efficiency of Feeder Cattle Futures After Cash Settlement," WAEA/ WFEA Conference Archive (1929-1995) 321382, Western Agricultural Economics Association.
    5. Raymond M. Leuthold & Philip Garcia & Nabil Chaherli, 1992. "Information, Pricing and Efficiency in Cash and Futures Markets: The Case of Hogs," The Economic Record, The Economic Society of Australia, vol. 68(S1), pages 27-33, December.

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